MF investments without middlemen

MUMBAI: Lay investors consider mutual funds a better bet than direct investments in stock markets. Mutual funds can be bought and sold through various distributors. But if you’re the kind who likes to invest on your own, you can buy mutual fund units on the Net.

Using internet, one can buy mutual funds through websites of asset management companies (AMCs). But, currently, limited mutual fund players offer online buying facility. ICICI Prudential Mutual Fund, Reliance Mutual Fund, Quantum AMC and SBI Mutual Fund are few of the fund houses that offer online buying. Few players even have restrictions on cities having its own office or partners.

ICICI Bank, HDFC Bank, Centurion Bank of Punjab and UTI Bank too have the facility. In addition to these options, online broking firms India Infoline, IDBIPaisabuilder.com and ICICIdirect.com too offer online purchase of mutual funds. If you have an account with these entities, chances are that you would have submitted your PAN card number and other documents while opening the account. As a result, paperless mutual fund buying may be permissible through these channels.

For both these transactions to be permitted, however, an individual will have to undergo paperwork at least once. “Even if the bank, whose account is being used for payment, has the details of the customer, those who seek to buy a mutual fund will have to fill up registration form once for each AMC (Asset Management Company),” says, M N Srinivasu, director of BillDesk, which offers online buying solutions to mutual fund companies.

Securities and Exchange Board of India (Sebi) too has mandated mutual fund houses to issue units only after the know-your-customer (KYC) norms are met. When you invest in a mutual fund for the first time, an application form and documents providing proof of your identity are to be submitted to that particular AMC.

So if one wishes to buy the product of, say, HDFC Mutual Fund, he would have fill an application form, available online, and courier it to the HDFC Mutual Fund’s point of service that may or may not be in the city of the investor. Once the form is submitted, the individual can buy or sell mutual fund units of any scheme offered by HDFC Mutual Fund. But, if the investor wishes to then invest in ING Vysya Mutual Fund, he would have to register himself with ING Vysya MF.

The mutual fund identification number (MIN) that was proposed as a measure to fulfill KYC norms, drew flak from several quarters. But, the availability of a single number would have saved mutual fund investors from going through the hassle of registering with every single mutual fund house he wanted to invest in.

Even if any medium accepts the payment for mutual fund investment without asking for registration, the units may not be allotted until the identity of the customer is known. Such a provider may later send you a form to be filled up and sent back with the customers’ signature, according to Srinivasu.

It should be noted that the cost of buying or selling a mutual fund would not be reduced if one uses the online medium. Few might argue that commissions paid to brokers and agents are eliminated by buying online, and hence the entry load should not be charged. But the argument is, at the moment, acceptable to none.

The mode of payment for online purchase or redemptions is through net banking, cheque or demand draft. With regards to net banking, however, mutual funds allow customers of only 4-6 banks for payment - HDFC, ICICI, Centurion Bank of Punjab, UTI, Indus Bank, IDBI Bank. While in case of cheque payment, some mutual funds may disagree to accept outstation cheques because they come with a cost.

Some others, who accept cheques from places where there are no points of service, may ask the customer to pay for the charges levied on payments through outstation cheques.